Published March 31, 2022
| Version v1
Journal article
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FREE-FLOAT AND STOCK LIQUIDITY: EVIDENCE FROM A POLICY EXPERIMENT
Authors/Creators
- 1. Indian Institute of Management Visakhapatnam; Faculty Block B, Indian Institute of Management Visakhapatnam, Visakhapatnam, India - 530003 Email: msjawed@iimv.ac.in
- 2. Indian Institute of Management Indore, Indore, MP, India
Description
On June 2010 the Securities and Exchange Board of India (SEBI) – the Indian market regulator, mandated the listed firms to increase their Minimum Public Shareholding (MPS) to 25%. Present study utilises this regulatory intervention as a natural experimental setup of an exogenous shock to free-floating stocks to examine the impact on stock liquidity. The study employs univariate Event Study and multivariate Difference-in-Difference regression analysis. Findings suggest that the MPS regulation significantly improved different stock liquidity measures and established the causality of stock free float to stock liquidity.